DEAR BOB: Please explain the pros and cons of leasehold estates. We live in a development with 99-year land leases. Many residents think the land lease is a good deal. I don’t. At what point in time will our house become unsaleable? –Robert S.
DEAR ROBERT: Buying a house with a 99-year land lease is fine for the first few buyers (because those owners won’t be around when the 99-year land lease expires and the title to the houses reverts to the leaseholder).
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Unless you have an option to acquire the title for the lot beneath your house, as the years go by your house becomes worth less and less. By the 99th year your house becomes worthless. After the lease expires, ownership of the structures on the land reverts to the landlord. For full details, please consult your attorney or tax adviser.
WHAT IS A LIFE ESTATE?
DEAR BOB: What is a life estate? My mother-in-law owns two properties subject to a life estate. She deeded one parcel to my husband. Is that legal? –Kay K.
DEAR KAY: A life estate means a life tenant has the right to occupy a property for his or her lifetime. After that individual passes on, then the remainderman who holds the legal title, subject to the life estate, can occupy, sell or do whatever he or she wishes with that property.
From your description, it sounds like your husband is the remainderman of a parcel, subject to a life estate for another person.
If your mother-in-law owned the property as the remainderman, after the life estate, she is free to convey her remainder interest to whomever she wishes. However, your husband has no legal right to enter that property because the life tenant has exclusive occupancy. For full details, your husband should consult a local real estate attorney.
CAN HOME SELLER CLAIM $500,000 TAX BREAK WITH A REVERSE MORTGAGE?
DEAR BOB: We have owned and lived in our home for 45 years. Now we want to sell it. Can we claim that $500,000 principal residence sale tax exemption although we obtained a reverse mortgage six years ago? –Ed and Bea C.
DEAR ED AND BEA: Yes. Placing a senior-citizen reverse mortgage on your principal residence has nothing to do with your Internal Revenue Code 121 $500,000 (up to $250,000 for a single homeowner) entitlement. To qualify for the sale exemption, you must have owned and occupied your principal residence at least 24 of the 60 months before its sale.
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